Pertinent Information Regarding Australian Banking for Expatriates:
Due to the evolution of the digital age, it has become more commonplace to trust online banking. Once the online banking revolution occurred, it became possible for customers to contemplate the possibility of reaching multiple markets with commerce. From this came a need for currency exchange to flow more freely than it had historically due to the vast amounts of capital that needed to be exchanged across borders internationally on a daily basis. Historically speaking, banks had a monopoly on the market. To this end, banks were able to get away with charging astronomical fees to move money between markets to consumers and businesses alike. Due to this injustice, FX companies decided to fill a hole in the market that consisted of consumers and businesses that wanted to move money at a fee that was less expensive. One of the markets that were greatly concerned with this was Australia. Previously, Australian banks had dominance on financial transfers between markets. Due to Australia’s growth in the global economy, the need arose to get capital to many different markets.
Banks play a huge role in the Australian financial system, as they hold most of the financial system assets. Australian banks, particularly after their two-decade period of deregulation, are involved in all types of financial intermediation, such as trading in insurance, fund management, and also business banking.
Australia has over 50 banks, of which 14 are government-owned. It’s generally considered that the Australian banking system is very stable, which in part is down to their very sturdy house prices (this is partly why the subprime mortgage crisis of 2008 didn’t put Australia into recession unlike much of the rest of the world).
The central bank in Australia is called the Reserve of Australia (RBA), and they, of course, control the monetary policy. The current RBA interest rate is at 0.25%, the same as the Fed and Bank of Canada’s. This is very low — record-breakingly low — but it’s assumed that they will rise again in the coming years, assuming the economic damage by Coronavirus is limited.
Despite this, research performed by Oxera in 2006 showed Australia to be one of the worst value banking systems compared to the rest of the world. This was the case for young professionals, low-income families, pensioners and median-income families. One example of Australian banking being more expensive than the UK is that only one of the big four banks (NAB) has a free account. Compare this to the UK, and almost any bank has a free account — in fact, most banks are legally obliged to offer free bank accounts. The USA is more similar to Australia in this respect, too.
Like most countries, Australia has deposit protection for customers using licensed banks. It’s a generous one, too, at $250,000 per account and is protected under the Financial Claims Scheme.
Main Banking Institutions in Australia
When attempting to choose a bank to work within Australia, it is wise to research various banks in order to ascertain which bank you may be interested in working with. Upon doing so, you will be able to see which bank is the ideal fit for your particular needs. Below, a list of the top banking institutions in Australia:
- National Australian Bank: One of the top banks in Australia to work with is National Australian Bank. Three benefits that their bank currently boasts are: no monthly service fee, no minimum opening or balance requirements, and no overdraft fees.
- Westpac: Westpac, otherwise known as Australia’s First Bank offers many competitive advantages to include having the ability to open a bank account up to twelve months prior to relocating to Australia. Their account opening process is advertised as three minutes in length and an Australian address is not required at the time of account opening from abroad.
- Suncorp: Suncorp seems to be the bank in Australia that is the best suited for students and young professionals. The policies are allowing for an individual that is just starting out to get established. Examples of this are: $0 monthly fees, free ATM withdrawals across their network, no minimum balance, and the possibility of benefiting from their BillSplitter application, which enables bills to be split amongst friends and colleagues.
- Commonwealth Bank of Australia: Commonwealth Bank of Australia is one of the leading banks in the country. One of their main benefits that they advertise is that one is able to open a bank account up to three months before arriving in Australia. Currently, they are offering no account fees for up to 12 months, which is another benefit of choosing their service along with their MasterCard debit card that is widely accepted across Australia.
- ANZ: ANZ bank is another leading bank in Australia. One of the benefits of this bank is that they allow your money to start gaining interest before you even arrive in Australia due to their potential to open an account up to twelve months in advance.
- George: St. George is another useful bank to work with in Australia. The benefits of working with St. George are for those that have more capital at the beginning. For example, the offer a $0 service fee for those that have a minimum balance of $2,000.
Surprises that One Will Encounter When Working with Australian Banks
There is a uniform process to qualify for a bank account within Australia. It is important that you are compliant with the requirements so that you are eligible to open a bank account and then be able to move capital both to and from that bank account. Here are three surprises to be aware of when dealing with Australian banks:
- There are two primary types of bank accounts: As is common in many jurisdictions around the globe, there are two primary types of bank accounts for consumers to consider in Australia. The checking account is your standard checking account for regular activity that comes with a check book and online banking. The second kind of bank account that is standard for most consumers is the savings account where the consumer will be able to earn interest on the money that is kept there on a monthly or annual basis. For corporate entities, there are business account options as well that have requirements for opening such as established business history from abroad or a corporate registration within Australia. In the effort to avoid the establishment of shell companies, international banking regulations have become far stricter than previously, which is why corporations will have more hurdles to jump through before being able to establish a business bank account within Australia.
- There is a 100-point system that you must meet when opening a bank account in Australia: What is important to note is that one’s qualifications to open a bank account in Australia are measured by a 100-point system. For example, important documents, such as a passport, will be far more valuable than other requirements with a point value of 70 points. Each bank will differ on their requirements for opening an account in Australia. This is precisely why it is wise to research beforehand to ensure that you have the proper requirements to open an account in Australia with ease.
- Be Aware of Moving Capital from Overseas to Australia and Vice Vera: Australia has a very strict requirement on the amount of money that is coming into the country. It is vital that you understand that amounts being brought into Australia that are larger than AUD 10,000 must be reported to customs. Additionally, in the reverse, Australian citizens will be taxed on capital that they are keeping abroad. The tax rate can sometimes even be as high as 45%.
Drawbacks to Sending Money Internationally with Banks
- Large Fees: One of the quintessential issues with sending money through banks is the large fees that are involved. A pertinent example of this is that individuals are resorting to sending money through agencies such as PayPal and Western Union in order to save capital. For example, Chase Bank charges $40 per international wire, whereas PayPal or Western Union charge around $25 depending the amount of the transaction.
- High Currency Exchange Rates: Banks are notorious for having exchange rates that are far higher than FX companies. This is precisely why it wise to research the currency exchange rate of banks in comparison with FX companies. More often than not, there is a great deal of capital to be saved from utilizing one rather than the other. Doing a comprehensive comparison can save you a substantial amount of capital depending on the amount that you will be transferring.
- Lack of Convenience to the Customer: Banks are quite difficult to deal with in the sense that it takes advance planning to have your transfers arrive on time. That said, banks are starting to offer the possibility of an online transfer for international wires. Even so, banks still take the customer between three and five business days to effectively transfer their funds from one jurisdiction to another. This can make it quite difficult for the customer to be able to anticipate when their wire transfers will arrive to satisfy the demands of their finances.
Benefits of Sending Money with FX Companies
- Low Fees or Possibly Even Zero Fees: FX companies specialise in having low or zero fees because it’s a way to attract customers. Most people don’t choose their bank based on the overseas fees, but with an FX company it’s their main pull.
- Great Currency Exchange Rates: FX companies have access to the interbank exchange rate, meaning they can provide near-perfect exchange rates. Some Australian banks will charge 4% spread and a fixed fee on top, so a 0% or 1% spread with no fee
- Easy and Convenient: One aspect that makes FX companies far easier to deal with is their versatility with the modern consumer and their increasing digital needs. For example, an individual is able to transfer money both to and from Australia from their home or on their mobile device. In terms of sending money to and from Australia, it is great to look at sites such as SendMoneyAustralia.com to commence one’s research about which FX company is ideal for their specifications.
Recommended FX Companies to Consider
- World First: World First is one of the FX companies and is known for a very high level of client satisfaction. They are particularly great when working with transfers that are both to and from Australia. Some of their notable benefits include: a fee waiver for transfers above AU $10,000, AU $10 for transfers under $10,000, regulation by ASIC, fast international payments, and award-winning customer service.
- Hifx: Hifx is a FX company that operates based on high level technology and high liquidity. It is one of the largest currency providers, owned by Euronet. They offer services in 60 different currencies and accept customers from Europe and Australia. If you want to know the differences between the two companies please check world first versus Hifx.
- OFX: Some of the benefits of choosing to work with OFX is that they are regulated by the ASIC and their parent company is even listed on the Australian Securities Exchange (ASX). Their global support team is widespread in that they have representatives in offices in the following cities: Hong Kong, Australia, USA, Canada, UK, and New Zealand. Since 1998, they have successfully transferred over $100 billion and due to this volume, are able to obtain better exchange rates than banks.
Concluding Remarks on the Subject
The Australian banking system isn’t the best model in the world, but it’s extremely safe. Although you may struggle to find a free bank account option, you’re covered for $250,000 and the whole industry has never collapsed as the UK and USA had. Australian banks are solid but when it comes to sending money abroad or financing your business, you might find other solutions more favourable. You’ll save a lot more with FX companies in both fees and exchange spread, as well as have an easier time using the service. Additionally, you will begin to see the diminishing value of working with banks that are notorious for extreme delays, increases in wire fees, and inflated currency exchange rates that will cause you to spend far more capital than you need going forward.
Read more Tips for Australian Immigration: